LABOR UNIONS Chapter 25

What is a Labor Union?  It is an organization of workers that represents all eligible workers in negotiating with management over wages and other key issues.  A worker union creates a monopoly or cartel position in selling their labor.  Unions are specially except from anti-trust laws under the Clayton Act of 1914 and by the National Labor Relations Act of 1935

Reasons Unions Created/Formed  Unions began forming in the mid-19th century in response to the social and economic impact of the industrial revolution.  The Knights of Labor emerged as a major force in the late 1880s, but it collapsed because of poor organization, lack of effective leadership, disagreement over goals, and strong opposition from employers and government forces.Knights of Labor  The American Federation of Labor, founded in 1886 and led by Samuel Gompers until his death in 1924, proved much more durable. It arose as a loose coalition of various local unions. It helped coordinate and support strikes and eventually became a major player in national politics, usually on the side of the DemocratsAmerican Federation of Labor Samuel Gompers Democrats

Labor videos   

History of Labor Unions  AFL-CIO - The American Federation of Labor and Congress of Industrial Organizations (est. 1955) 11 mill members  Change to WIN Federation (2005) 5.5 mill  35% of all workers in the 50’s belonged to a union  Now, 12% of American Workers belong  Much higher in Public Sector jobs than Private Sector Jobs (non-gov’t) Why the decline?

Why Less Union Membership?  Fewer manufacturing jobs  Fewer agricultural jobs  Workforce more highly educated  High Tech industry boom of 80’s  Outsourcing

What are the Largest Unions?  National Education Association – Public School Teachers (2.73 mill)  Service Employees International Union – Health care and property services (1.51 mill)  American Federation of State, County and Municipal Employees (1.46)  Teamsters – Transportation Industry (1.4 mill)  United Food and Commercial Workers – retail food, meatpacking, poultry (1.38 mill)

Largest Unions…  American Federation of Teachers – daycare and non-public teachers (1 mill)  United Steelworkers (.75 mill)  International Brotherhood of Electrical Workers (.70 mill)

Types of Unions  Craft Union A Union made up of workers who practice the same craft like actors, carpenters, electricians, plumbers, airline pilots, etc… Most of these union members are specially trained and/or educated to perform their craft

 Industrial Union A union made up of workers in the same industry, such as autoworkers, teamsters, steelworkers, etc… These workers usually work for large industrial firms and vary between skilled and unskilled labor

 Public Employee Union Made up of workers employed by the government such as school teachers, municipal employees, and firefighters, etc… These workers work for federal, state and local government agencies

Unions Have “Market Power” Trade-off Quantity of Labor (thousands of hours) Wage Rate As Unions negotiate higher wage rates, this generally means fewer union members employed After negotiations Before negotiations

Due to the trade-off, Unions have certain unpredictable goals Goal #1 – To REDUCE the elasticity of demand for union labor A) Unions want to REDUCE the availability of substitute factors  Passing laws that limit immigration  Limit employment of non-union workers during strikes

Goal #1 – To REDUCE the elasticity of demand for union labor b) Unions want to REDUCE substitute products 1) Support laws to limit imports that would take away union jobs 2) Oppose legislation for school vouchers that would take let people send kids to private schools Examples:

Quantity of Labor (thousands of hours) Wage Rate After negotiations Before negotiations When the demand for labor is less elastic

 Goal #2 – To INCREASE the demand for union labor – 3 Ways 1. Increase the product demand – higher product demand means greater demand for labor to produce the item - “American Made” Campaign, Support move to full day kindergarten 2. Increase the (MPP) Marginal Physical Product of union labor – the change in output with one additional unit of output – increase productivity through better labor training (negotiated)

3. Increase the prices of substitute factors – support legislation that discourage/penalize outsourcing – a loss of American union jobs Support a rise in the minimum wage – making non- union workers more expensive and less attractive

 Goal #3 – To DECREASE the supply of union labor “To keep control of the supply of union labor” Closed Shop – A firm that requires union membership as a condition for employment - A closed shop is a form of union security agreement under which the employer agrees to only hire union members, and employees must remain members of the union at all times in order to remain employed Union Shop – A firm that requires employees to join the union within a specified time - A union shop is a form of a union security clause under which the employer agrees to hire either labor union members or nonmembers but all non-union employees must become union members within a specified period of time or lose their jobs

Collective Bargaining  Collective Bargaining is where a union bargains with management on behalf of the workers.  The Union is a labor cartel and holds market power and can directly affect the wage rate through collective bargaining.  They have the threat of a labor strike to negotiate

Monopsony Employer (rare)  A Monopsony Employer is the lone buyer in a factor market – The only employer in a small town…Boeing Aircraft in Wichita, KS 40%  Ethanol Plant in York, Champion Homes, Corn Research Companies

Unions and Wages  Research indicate that unions increase the wages of union employees, but decrease the wages of nonunion employees  Higher union wages mean fewer workers employed in the union market; and, lower wages for nonunion workers.

Unions and Productivity Reasons that unions hurt productivity  Strikes (or lock-outs) stop productivity totally  Featherbedding – Negotiating unnecessary staffing requirements  Keeping willing employers and employees apart exchange of labor and management (price controls hurt natural job equilibrium)

Unions and Productivity Reasons that Unions help productivity  Providing union workers a collective voice  Attracting higher quality workers  Greater “fringe” benefits  Better working conditions

The Taft Hartley Bill  AKA: The Labor Management Relations Act of 1947  AKA: The Slave Labor Bill (labor’s name)  Introduced by Sen. Robert Taft and Rep. Fred Hartley (both hated unions)  It’s intention was to decrease the gains made by the labor movement

Effects of the Act  Limited the ability for unions to strike  Strikes had to be announced – 60 days notice  Strikes could not take place if it went against the national interest – federal employees can not strike  Closed Shops were limited – “right to work” laws  Union dues were regulated and union management were scrutinized  No communism connections 

Quiz next time What are the three universal Union Goals:  REDUCE…  INCREASE…  DECREASE… Research Question: What did the Taft-Hartley Act of 1947 prohibit concerning labor unions?